Deceptive and misleading conduct by corporations: the provisions

by The FindLaw Team

Most of us will probably have seen a television or newspaper ad that promises that if we consume a certain product, we’ll be fabulous beyond our imaginations! A healthy level of scepticism is probably required when we’re exposed to such advertising, and the good old adage of ‘if it’s too to be true, it probably is’ would probably be applicable when faced with advertising that promises us the world However, that being said, many consumers have unwittingly found themselves as victims of misleading or deceptive conduct, and probably have wondered to themselves: why are such advertisements or behaviours allowed? Well, the Australian and Consumer Law (ACL) does not allow a person or corporation who is involved in a trade or commerce to engage in conduct that is misleading or deceptive, or is likely to be misleading or deceptive. The law against misleading or deceptive conduct, is arguably the most important consumer related law, and is vigorously protected in Australia. Consumers need to be assured that they are being protected by those involve in trade or commerce from unscrupulous behaviour: imagine if there were no such laws? It is a rather scary proposition.

The law against misleading or deceptive conduct

The prohibition against misleading or deceptive conduct can be found under s 18 of the ACL, and the provision is wide in its definition of what constitutes misleading or deceptive conduct. Section 18 does not specifically create any liability that can be found in other common law causes of action, but rather, the section is more concerned with establishing norms of conduct from a person or a corporation who is involved in trade or commerce.

How is a breach of misleading or deceptive conduct established?

When the courts interpret the s 18 provisions, the ordinary meaning of the words are used to ascertain if a breach has occurred, and additionally, there are three elements that must be satisfied in order to establish a breach:

Conduct which confuses the public or causes uncertainty: is judged to be misleading or deceptive, when assessed against the impact of the conduct on the specific section of the public in which the conduct is directed towards. There is no requirement that a party has been misled in order for the conduct to be viewed as misleading or deceptive, but rather, statements, opinions or advertisements with puffery, are all behaviours that can be considered as a breach of this element.

Furthermore, it is important to be aware, that when making an assessment of the particular class of consumer that is being misled, the courts will apply a reasonable person test in deciding on whether the conduct was misleading or deceptive, or was likely to mislead or deceive.

In applying the reasonable person test, the following principles are taken into account by the courts when seeking an answer:

• the section of the public or community must be identifiable• the matter must refer to all parties within the section of the public or the community, and also includes the intelligent and not so intelligent; the incisive and susceptible members of the section of the public or community• evidence that a person made an error in their judgment in regards to the conduct in question• why the mistaken belief has arisen.

Activity must be part of trade or commerce: in order for a person or corporation to be in breach of the provisions, their activities must have some aspect of trade or commerce.

And finally, there must be evidence of misleading or deceptive conduct or conduct that is likely to mislead or deceive, in order for a person or corporation to be found to be in breach of s 18.

The test that the courts will apply when making an assessment of conduct that is misleading or deceptive, is an objective one, and the overarching question that needs to be answered when applying the test is: whether or not a statement expresses a false meaning, and induces, or is capable of inducing error.

The interesting aspect of s 18, is that even when a person or corporation who has acted honestly or reasonably, can still be found to be in contravention of the section if it is judged that their behaviour is misleading or deceptive, or is likely to mislead or deceive.

Needless to say, that the s 18 provisions can be rather complicated, and although the construction of s 18 is a catch-all section, there are some limitations in the application. The courts generally have not specified the boundaries of behaviours in which the section applies, even though the heart of the provision is consumer protection.